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Friday, March 04, 2005

The Next "Killer App"

In the late '90s, many business magazines like Fast Company and Business 2.0 talked about the next "killer app". They were referring to how new technology was having such a disruptive effect upon business and turning things upside down. Web browsers, cell phones, PDAs, even blogs have been called "killer apps".

Well, I am going to predict the next killer app for the coming decade.


Remember that you read it hear first.

Increased Commoditization
Over the past 5-10 years we have seen increased commoditization among businesses. Wal-Mart is perhaps the best example of this trend to wring every last penny out of the supply chain to provide the lowest prices. Other retailers have had to follow suit by trying to become the lowest cost provider. KMart is just one of the casualties of this battle. The recently announced merger of Federated and May department stores is a last gasp of old-line retailers trying to maintain relevance. Target is one of the few that is still battling Wal-Mart; they have found a differentiator in providing low cost yet somewhat fashionable items.

At the other end of the spectrum, luxury product retailers have become much more mainstream, as the masses have clamored for luxury items at non-luxury prices. Thus the success of Williams-Sonoma, Pottery Barn, and I would argue, even Starbucks.

However, with increasing commoditization and globalization, businesses are going to have to find another differentiator. I believe the businesses that not only survive but thrive over the next decade will be those that make "customer service" their mantra.

Many companies claim to make customer service their top priority. But I believe that this is often lip service. The best way to see how important a company views customer service is to see how well they pay their employees that work directly with their customers.

A segment that I look to see this played out in is hardware. In my estimation, Home Depot and Lowes have very poor customer service. Having grown up in Atlanta going to Home Depot most of my life, I was always amazed at the great customer service there. If you went to the paint department for a question, the people working there were professional painters who could answer all your questions. Not anymore. The last time I asked a question at the paint department of Home Depot the response was, "Um.....we're not trained on that." I often wander the aisles looking for someone to help me. Lowes is no better.

It is a shame that the customer-focused culture that Bernie Marcus and Arthur Blank instilled at Home Depot has been replaced by a quantitatively-driven Six Sigma culture brought in by Bob Nardelli. If either Home Depot or Lowes can figure out how to provide excellent customer service, they will win the game.

One of the reasons that customer service is become even more important is the fact that consumers are far more educated and sophisticated than ever before. On a recent trip to Best Buy, I asked an employee about some MP3 players. This employee was supposedly their expert on MP3 players, yet he knew almost nothing about them. I don't blame the employee so much as I blame Best Buy for either not providing the necessary training or increasing salaries to attract more qualified employees.

A company that has figured out customer service to its advantage is Quiktrip. Quiktrip is a gas station and convenience store found in the south and southwest. Unlike many gas stations, Quiktrip are amazingly clean and pleasant to go into. Much of this is because of the employees. It is impossible to walk into a Quiktrip without an employee saying hello.

So how is Quiktrip able to get such good employees? They pay well. In Atlanta, 2nd Assistant Managers make around $38,000 a year. That is outstanding pay for working at a gas station.

The amazing thing about Quiktrip is that people rave about them. Isn't that crazy? Who talks about how much they love a gas station? That is the result of great customer service.

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